Verizon Phone Upgrades No Longer Toll-Free

Starting later this month, Verizon will begin charging $30 each time a customer wants to upgrade to a new subsidized handset. The carrier joins the ranks of other wireless providers, many of which also charge similar amounts. As new smartphones become more and more expensive, providing new ones at subsidized prices has begun to strain carriers' bottom lines.

By Rachelle Dragani
04/12/12 10:49 AM PT

Verizon customers ready for a handset upgrade will have to pay a $30 fee starting on April 22, the company announced Wednesday.

The cost will be in addition to the price of the new phone and a two-year contract.

Only users upgrading at the end of a contract, and therefore receiving the discounted price on a new mobile phone, must pay the $30. If a user is upgrading before their contract is complete and paying the full price of the phone, the fee will not apply.

The fee could also be offset, or at least minimized, if a user chooses to exchange an old Verizon device via the Verizon Wireless Trade-In Program, according to the company.

Verizon said the upgrade fee will be used for wireless workshops, online educational tools and consultations with experts who provide advice and guidance on devices, according to a press release announcing the change.

The company couldn't provide any further information on the fee, according to Verizon spokesperson Brenda Raney.

Joining Competitors

The nation's largest wireless provider noted that the fee isn't unique to Verizon. AT&T, Sprint and T-Mobile, the three other major U.S. carriers, all apply upgrade fees. Sprint and AT&T charge their customers $36. As of April 22, T-Mobile will charge the least for an upgrade, at $18. AT&T just upped its fee from $18 to $36 in February.

With the rising costs of smartphones, it was only a matter of time before Verizon followed with its own upgrade fee, said Bill Morelli, director of mobile technologies and convergence at IMS Research.

"This move by Verizon is not really a surprise," he told the E-Commerce Times.

No More Freebies

In the U.S., where carriers typically absorb most of the up-front cost of mobile phones before locking customers into years-long contracts, providers are beginning to feel the pressure as pricier smartphones now make up a large chunk of the mobile market.

"When smartphones were 10 percent of sales, this was not that big of an issue," said Morelli. "However, now that smartphones represent the majority of sales in the U.S., carriers are having to absorb higher and higher subsidies to continue to attract and retain customers with top-tier handsets."

As smartphones and the networks on which they operate also become increasingly complex, so do the fees, said Morelli. That's especially apparent with new, expensive technologies coming into play, such as LTE networks, near field communication technology and AMOLED displays.

"The carriers are under pressure from the financial community and investors to maintain profit margins, so this fee is a natural end result," said Morelli.

Verizon's upgrade fee still comes slightly short of its main competitors, AT&T and Sprint, perhaps because Verizon has recently endured a spate of customer outrage when it tried to implement a new fee late last year. At that time, the company added a one-time $2 fee for customers paying online, but it scrapped those plans in the face of widespread customer anger.

Sooner rather than later, though, customers are going to have to be ready to shell out a little more each time they upgrade, said Laurie Lamberth, mobile analyst and founder and VP of business development at Lamberth and Associates.

"Long story short, this is a tempest in a teapot," she told the E-Commerce Times.